Financial and capital market Commission, the provisions of regulations No 132, Riga, 12 august 2015 (financial and capital market Commission Council meeting Protocol No 28 6. p.)
Insurers and reinsurers internal model legislative provisions Issued in accordance with the insurance and reinsurance law article 128 i. scope and definitions 1. "insurers and reinsurers internal model legislative provisions (hereinafter referred to as the rules) laying down the requirements for the use of internal models for test, statistical quality standards, calibration standards, the operating profit-and-loss extension to important business units, validation (validation) standards and documentation standards. These rules are also applicable to such data and the models obtained from third parties, as well as a group of internal models. 2. The rules are binding on the insurance companies and affiliates of the Member insurer (hereinafter insurer), as well as reinsurance companies (hereinafter-reinsurers). 3. the terms used in the rules: 3.1 credit risk – loss or negative financial situation changes the risk arising from the issuers of securities, counterparty and any customer kredītstāvokļ fluctuations, insurer or reinsurer and a counterparty default risk, spreads risk or market risk concentrations; 3.2. the probability distribution forecast – a mathematical function that certain groups of mutually exclusive events give the future realization of risk; 3.3. risk (risk measure)-a mathematical function that given the risk exposure of the probability distribution forecast to assign the value in money terms that increase with the risk of a monotone; 3.4. General use of the term corresponds to the financial and capital market Commission (hereinafter the Commission) on august 12, 2015 is the normative regulation No 130 "insurer and reinsurer solvency capital requirements and the calculation of the own funds regulations rules" used terms.
II. the use of the internal model test (use test) the insurer or reinsurer 4. ensure that the internal model is widely used and it is essential for management of the system according to the European Commission's delegated regulations (EU) 2015/35 (2014-10 October), complementary to the European Parliament and Council directive 2009/138/EC relating to the taking-up and pursuit of the business of insurance and reinsurance (Solvency II) (hereinafter – EU Regulation No 2015/35) conditions , in particular: 4.1 risk management system and decision-making processes; 4.2. the solvency capital assessment and placement according to the risk classification, as well as risk and solvency assessment itself. 5. the calculation of the solvency capital requirement of the frequency using the internal model meets the frequency in which the insurer or reinsurer uses other internal model those rules referred to in paragraph 4. 6. the insurer's or reinsurer's Board is responsible for the internal model construction and operations continued compliance with the requirements and that the internal model according to the relevant insurer or reflect the risk profile of reinsurers.
III. Statistical quality standards 7. Internal model and in particular its underlying probability distribution forecast calculation complies with these rules 8-15 EU and criteria set out in Regulation No 2015/35 requirements. 8. The insurer or reinsurer based assumptions on which its internal model. Methods used to calculate the probability distribution forecast shall be based on: suitable for 8.1 applicable and appropriate actuarial and statistical methods, and comply with the methods used to calculate technical provisions; 8.2. the timely and credible information and realistic assumptions. 9. the internal model for the calculation of the data used is accurate, complete, and relevant. The insurer or reinsurer shall update the data set used for the probability distribution to calculate the forecast at least once a year. 10. Despite the selected calculation method of internal model to assess the risk of capacity is sufficient to ensure that it is widely used and that it is essential for the management of the insurer or reinsurer in the system, in particular the risk management system, decision-making processes and capital deployment according to the classification of risk. The internal model shall cover at least the non-life underwriting risk, life insurance underwriting risk, health insurance underwriting risk, market risk, credit risk and operational risk, as well as any other relevant risks facing insurers or reinsurers. 11. The insurer or reinsurer of the internal model can take into account the impact of risk diversification within the module or between modules if diversification of risk impact detection methods are appropriate. 12. The insurer or reinsurer of the internal model can fully take into account the impact of risk mitigation techniques, where the credit risk and other risks arising from the use of risk mitigation techniques, it is appropriate to reflect the internal model. 13. The insurer or reinsurer internal model calculation of risks associated with the contracts concluded with the financial guarantees and contractual options if their impact is significant. Internal model assesses the risks associated with both policyholder options, both with insurers or reinsurers of contractual options, taking into account the financial and other conditions may affect the use of this possibility. 14. The internal model are allowed to take into account the future of the insurer or reinsurer management measures (future management actions), the implementation of which would be justified in special circumstances, if they comply with the EU Regulation No 2015/35 the provisions of article 236. If future management measures are taken into account, then the internal model shall also take into account the period of time required for the implementation of the measures. 15. The internal model takes into account all payments to policyholders, beneficiaries and ceding regardless of whether or not they are guaranteed according to the concluded insurance or reinsurance contract.
IV. The calibration standards 16. developing internal model, insurer or reinsurer, pursuant to EU Regulation No 2015/35 requirements, you can use a different period or risk measure than indicated in the insurance and reinsurance law article 119 in the fourth paragraph, if the insurer or reinsurer may use the results of the internal model to calculate the solvency capital requirement, ensuring that policy-holders and beneficiaries level of protection corresponding to the insurance and reinsurance law specified in article 119. 17. If possible, the insurer or reinsurer gets the solvency capital requirement directly from the probability distribution forecast established by the internal model using insurance and reinsurance Law 119 in the fourth paragraph of article specified values measured risk. 18. If the insurer or reinsurer solvency capital requirement cannot be obtained directly from the probability distribution forecast established by the internal model the solvency capital requirement calculation process is allowed to use zoom (approximation). Zoom for use in case the insurer or reinsurer shall provide the Commission with the information in accordance with the EU Regulation No 2015/238. Article 35 stating that policyholders are provided in the insurance and reinsurance law requirements of article 119 the appropriate level of protection.
V. profit and loss attribution insurer or reinsurer 19. at least once a year, review the conduct of each major unit (EU Regulation No 2015/35 understood) profit or loss causes and sources. 20. The insurer or reinsurer according to EU Regulation No 2015/35 requirements, as the internal model of the selected risk classification purposes shall explain the reasons for the profit or loss and sources. Risk classification and assignment of profit or loss of the insurer or reinsurer reflects the risk profile.
Vi. The validation (validation) standards

21. The insurer or reinsurer shall at regular intervals carry out validation of the internal model, which includes internal model calculation results check the specification constantly test and compare the results with the experience and meeting the EU Regulation No 2015/35 requirements. 22. the internal model validation includes internal model validation the process of statistics (statistical process) in line with EU Regulation No 2015/35 requirements, which effectively shows that, with the help of the internal model, the estimated capital requirement is appropriate. 23. the validation process used in statistical methods for testing the suitability of the probability distribution forecast compared with operating losses of experience, as well as all the relevant new data and information. 24. the validation process includes: 24.1. internal model stability analysis and results of the internal model special sensitivity in relation to changes in key basic assumptions; 24.2. the internal model used, data accuracy, completeness and compliance assessment.
VII. Documentation standard for the insurer or reinsurer 25 document their internal model of the concept and operational aspects according to EU Regulation No 2015/35 requirements. 26. the internal model documentation includes a justification, which certifies the conformity of the use of the internal model test, statistical quality standards, calibration standards, extension of profit or loss and validation standards. 27. the internal model documentation includes theories, assumptions and internal model and the underlying mathematical basis of empirical detail. The minimum content of dossiers EU Regulation No 2015/35.28. Insurer or reinsurer, taking into account EU Regulation No 2015/35 in certain aspects, evaluate and record indicates all the circumstances under which an internal model does not function efficiently. 29. The insurer or reinsurer shall document all insurance and reinsurance law 123. referred to in the second subparagraph of article significant internal changes of the model, showing the information in accordance with the EU Regulation No 2015/35 requirements.
VIII. Closing question 30. provisions shall enter into force on January 1, 2016.
Informative reference to European Union directive rules included provisions arising from the directive of the European Parliament and of the Council in 2009/138/EC relating to the taking-up and pursuit of the business of insurance and reinsurance (Solvency II). Financial and capital market Commission President k. Zakuli States